Correlation Between Fortinet and Palo Alto

Can any of the company-specific risk be diversified away by investing in both Fortinet and Palo Alto at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fortinet and Palo Alto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fortinet and Palo Alto Networks, you can compare the effects of market volatilities on Fortinet and Palo Alto and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fortinet with a short position of Palo Alto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortinet and Palo Alto.

Diversification Opportunities for Fortinet and Palo Alto

0.93

Correlation Coefficient

Fortinet  Palo Alto

Almost no diversification

The 3 months correlation between Fortinet and Palo is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Fortinet and Palo Alto Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palo Alto Networks and Fortinet is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fortinet are associated (or correlated) with Palo Alto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palo Alto Networks has no effect on the direction of Fortinet i.e., Fortinet and Palo Alto go up and down completely randomly.

Pair Corralation between Fortinet and Palo Alto

Assuming the 90 days horizon Fortinet is expected to generate 1.09 times more return on investment than Palo Alto. However, Fortinet is 1.09 times more volatile than Palo Alto Networks. It trades about 0.23 of its potential returns per unit of risk. Palo Alto Networks is currently generating about 0.14 per unit of risk. If you would invest  6,787  in Fortinet on September 13, 2024 and sell it today you would earn a total of  2,436  from holding Fortinet or generate 35.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Fortinet  vs.  Palo Alto Networks

Fortinet

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fortinet reported solid returns over the last few months and may actually be approaching a breakup point.

Palo Alto Networks

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Palo Alto reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortinet and Palo Alto

The main advantage of trading using opposite Fortinet and Palo Alto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortinet position performs unexpectedly, Palo Alto can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Palo Alto will offset losses from the drop in Palo Alto's long position.

The idea behind Fortinet and Palo Alto Networks pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the CEOs Directory module to screen CEOs from public companies around the world.